Alan Pollard, CEO, Civil Contractors NZ
I want to start by acknowledging how tough it is for business right now. Many of our members are restructuring their businesses to compensate for lack of work and positioning themselves to get through this period at a time when inflation and interest rates have remained stubbornly high.
So it is with some trepidation that I say that I am optimistic for the future of our industry. I say that because my sense is that if businesses can take the necessary steps to get through the next 12 to 18 months, we are likely to see a complete turnaround in industry fortune.
There are several reasons for my optimism.
First, in the Government Policy Statement on Land Transport, there is a significant increase on roading capital and maintenance funding. NZTA expects to invest $32.9 billion over the next three years, including $5.5b in the so-called ‘pothole prevention fund’.
There are some qualifiers around this. It takes time to bring work to market, and while we are already seeing some funding applied, it appears to be weighted to year three rather than year one. Also, while the NZTA has started bringing work to market, there is little indication it is starting to flow through council budgets just yet.
That said, at least the work is in the pipeline.
Second, the Government has finally announced its vision for water investment and management. Councils are to decide on the entity structure to deliver their water needs – either by Council Controlled Organisation, or by trust.
Auckland (Watercare) and Wellington (Wellington Water) already have CCO structures. Other councils have 12 months to join with neighbouring councils and set up combined structures, and then submit water plans for approval.
In addition, the Local Government Funding Agency, which is the lowest cost funding provider to local government, will support the water entities leveraging up to 500 percent of council operating revenue (about twice the current level). This suggests that, given our aging infrastructure, there is a lot of water work coming. If councils are sensible about the long-term, much of the initial work may involve water metering.
Third, the National Party has often described itself as the party for infrastructure. Despite being in a three-way coalition, that hasn’t changed. The Government has talked up its infrastructure priorities since being elected, and we are now starting to understand them more, and see progress toward their plans.
At a recent conference in Auckland, Minister Chris Bishop said a new National Infrastructure Agency will be operational by 1 December. This Agency will be responsible for existing Crown Infrastructure Partners functions and responsibilities including: the administration of infrastructure funds, partnering with agencies to deliver projects involving private finance, connecting investors to relevant funds as well as ensuring the process for private investment in Crown projects is transparent, consistent and efficient.
The Government campaigned on looking at alternative funding options for infrastructure, so it is pleasing to see this following through into a new Agency.
Fourth, we have long argued that infrastructure investment must be looked at as an inter-generational investment, with the pipeline of committed and funded work spanning government electoral cycles.
It is all too common for incoming governments to reverse infrastructure decisions on ideological or philosophical grounds (think Roads of National Significance – started by National, cancelled by Labour, reintroduced by the current coalition). It is hard to imagine being able to gain cross-party support given the massive ideological differences between the political left and right.
But it was heartening to hear the Prime Minister is keen to explore ‘taking the politics out of infrastructure’ following his recent trip to Australia and the Leader of the Opposition indicating they are prepared to consider it.
If you think about it, they don’t need to agree line-by-line items in a comprehensive list of potential infrastructure projects. Why don’t they just each identify some key projects they are prepared to sponsor, agree on those, lock their delivery in, and get on with planning and delivery – confident in the knowledge that they are immune to political interference?
Much of what I have covered above gives cause for confidence in the medium-to-long term but is little comfort in terms of immediate workflow. We continue to advocate for short-term stimulus to get us through the next 12 months – to bring forward a renewals programme (the pothole fund is an example of this), to provide funding for training to keep underutilised staff engaged, to remove consent barriers (the fast-track legislation will help with this but it will take time to go through the legislative process), and to simplify the government procurement process which is, in my view, fundamentally broken.
Civil Contractors NZ, often with the support of other associations, will continue to advocate for solutions to address short, medium, and long-term issues.
It is pleasing to see our messages are getting through, but we are determined these efforts make a tangible difference to our members. The next 12 months may not be pretty, but the rewards for sticking it out look like they will be worth it.
Parting words from Jeremy Sole- a final column